This is part one of a two-part series. Read part two here.
Electricity bills in California are likely to change dramatically in 2026.
The California Public Utilities Commission (CPUC) is in the midst of an unprecedented overhaul of the way most of the state’s residents pay for electricity.
Utility bills currently rely on a use-more pay-more system, where bills are directly tied to how much electricity a resident consumes.
California lawmakers are asking regulators to take a different approach. Some of the bill will pay for the kilowatt hours a customer uses and a monthly fixed fee will help pay for expenses to maintain the electric grid: the poles, the substations, the batteries, and the wires that bring power to people’s homes.
The adjustments to the state’s public utility code, section 739.9, came about because of changes written into a sweeping energy bill passed last summer, AB 205.
A stroke of a pen, a legislative vote, and the governor’s signature created a move toward unprecedented income-based utility fees.
“This was put in at the last minute,” said Ahmad Faruqui, a California economist with a long professional background in utility rates. “Nobody even knew it was happening. It was not debated on the floor of the assembly where it was supposedly passed. Of course, the governor signed it.”
Faruqui wonders who was responsible for legislation that was added to the energy bill during the budget writing process. That process is not transparent.
“It’s a very small clause in a very long bill, which is mostly about other issues,” Faruqui said.
But that small adjustment could have a massive impact on California residents, because it links the size of a monthly flat fee for utility service to a resident’s income. Earn more money and pay a higher flat fee.
That fee must be paid even before customers are charged for how much power they draw.
Regulators interpreted legislative change as a mandate, but Faruqui is not sold.
“Energy is just one of those issues that just affects people’s pocketbooks in a way that kind of cuts through politics."Bernadette Del Chiaro, California Solar and Storage Association
“They said the commission may consider or should consider,” Faruqui said. “They didn’t mandate it. It’s worth re-reading it.”
In fact, the legislative language says the commission “may” adopt income-based flat fees for utilities. It does not say the commission “should” adopt them.
Nevertheless, the CPUC has already requested and received nine proposals for how a flat fee should be implemented.
The suggestions came from consumer groups, environmentalists, the solar industry and utilities.
San Diego Gas and Electric (SDG&E) rolled out its plan this past spring and touts four different categories of fees.
“This is really about taking our existing rates and really changing how electricity is priced for customers to make it simpler,” said Scott Crider, a vice president at SDG&E. “To make it more predictable. And to really create that savings for lower-income customers.”
SDG&E’s unavoidable monthly fees ranged from $24 to $128, depending on income.
The utility will also lower the per kilowatt cost of electricity which the U.S. Energy Department said it is currently the most expensive in the nation, about $0.47.
“Moving away from fossil fuels and more electricity in our homes and vehicles, we really need to modernize the pricing structure to make sure we can address affordability for the state while helping meet the state’s very, very aggressive climate goals,” Crider said.
Court filings show SDG&E now suggests simplifying its plan.
Customers who qualify for the California Alternate Rates for Energy program (CARE) or the Family Electric Rate Assistance program (FERA) would pay small flat fees. The idea is to lower their overall bill.
SDG&E customers who do not qualify for financial discounts would pay a roughly $73 a month mandatory fee. The utility would add the higher $128 fee for more affluent customers, later.
The CPUC has engaged an administrative law judge to sift through the proposals and adopt, revise or blend them into a proposed decision.
“You know this is a really significant policy debate,” said Bernadette Del Chiaro of the California Solar and Storage Association.
The solar industry wants an open and public process that involves the residents who are affected.
“Energy is just one of those issues that just affects people’s pocketbooks. In a way, that kind of cuts through politics and, you know, any other kind of thing that’s happening in our regions around politics and policy,” Del Chiaro said. “I think it’s really important that the commission gain public trust on this one.”
But public participation is not high on the agenda of the administrative law judge handling the case.
The legal officer has already rejected formal requests for a public hearing and for additional evidence before a proposed ruling is finalized.
That ruling is expected to arrive in the Spring with a final decision, mandated by the legislature, coming by next July.
